Updated April 15, 2016: Further information received from the Infrastructure Canada has been incorporated, as noted, in this article.

The new, transit-friendly Trudeau government has announced a major shift in Ottawa’s funding for municipal transit including policy changes to improve the flow of money:

• Decisions about which projects should be funded with federal dollars will rest with local agencies rather than being dictated by Ottawa.
• Federal funding will pay for up to 50% of projects compared to previous schemes in which each level of government contributed 1/3 (e.g. the Vaughan subway extension).
• The pool of funds will be distributed based on ridership, not on population, so that provinces with well-used transit systems will receive most of the money.

In the first three years, $3.4-billion will be allocated with about 44% coming to Ontario. Of this, the TTC expects to see about $880-million according to TTC Chair Josh Colle as quoted by the CBC with money going to “what can be done quickly” with “the greatest customer impact.”

That will be a challenge on a few counts.

The TTC’s Capital Budget for 2016-2025 includes about $2.7-billion in unfunded projects, but some of these are not planned to start, indeed are not even required, in the immediate future.

The table above (from the City Budget Analyst Notes) shuffles around a bit every time we see it, but the outline remains the same. The serious problem with capital funding begins in 2018 when the City’s headroom for additional borrowing (in the absence of some other scheme to finance its capital programs) will be exhausted.

The $55.4m shown for 60 additional streetcars may or may not actually be triggered as a 2016 expense depending (a) on how many cars Bombardier delivers this year, and (b) on how much Toronto trusts Bombardier with an add-on order when the base contract is running so late.

Most of the list above deals simply with replacing or repairing vehicles and infrastructure that are at the end of their natural lives, and only a small part of the total (99 buses, 60 LRVs) would actually bring more service and capacity to the system. Toronto has not shown much enthusiasm for funding additional operating costs that a larger fleet represents and persists in the belief that ridership growth can somehow be handled by “efficiencies” within the base budget.

Another problem, of course, is that if $2.7b is “below the line” in unfunded status, and Ottawa is prepared to contribute only 50%, then the remaining 50% still has to come from somewhere, likely from the City of Toronto which claims to have no ability to finance this spending.

Many other projects are not even included in the ten year budget notably Waterfront transit and the Relief Line, not to mention some costs associated with capacity expansion on the existing subway. Queen’s Park is funding the first wave of LRT construction in Toronto, but other proposals sit on the wish list:

• The main section of the Crosstown from Mount Dennis to Kennedy is fully funded by Queen’s Park, as is the Finch West LRT from Finch West Station to Humber College.
• The Crosstown East LRT is to be funded through a shuffle of available money among Scarborough transit projects. It is not yet clear whether changes to SmartTrack and the Scarborough Subway Extension will actually balance out the LRT’s full cost.
• The Crosstown West LRT would, in theory, be funded from “savings” through the cutback of SmartTrack to Mount Dennis, but ST itself is not fully funded or costed. How much will actually be available remains to be seen, especially when Queen’s Park’s share will only be an “in kind” contribution through GO-RER upgrades.
• The Finch West LRT extension to the airport, the Crosstown extension north beyond UTSC to Malvern, and a Sheppard East rapid transit line have no funding.

Ottawa’s budget papers describe the commitment in more detail, and beg a few questions about just how much help Toronto will get for its infrastructure funding problems.

The government has a “plan to invest more than $120 billion in infrastructure over 10 years”. That will be quite a feat when the chart for actual spending never exceeds $10b/year and is well below that amount in the early stages.

Updated: According to Infrastructure Canada, the chart above does not include all classes of proposed spending, and that’s why the total value of the columns is less than the $120 billion cited in the text.

… referencing Chart 2.1 in the Budget, the funding profile included only new funding (i.e. $60 billion) announced for public transit, green, and social infrastructure respectively. It does not include previously existing funds, nor does it include the new commitments to support initiatives such as broadband infrastructure, and infrastructure investments at Post-Secondary Institutions which are above and beyond the commitments in to the three above identified streams. [Email of April 14, 2016]

In other words, some of the $120 billion is “old money”, and some of it lies in areas outside of the scope of the infrastructure announcement. It’s a lot of money, but not quite as big a pot as some might have thought specifically for the transit, green and social infrastructure envelopes.

There is some confusion in the budget papers because they speak of $11.9b over “five” years, although it is fairly obvious that the first three years in the chart above total roughly that amount. Moreover, the public transit component of this spending is a three-year spend, while the others are described as five-year:

Phase 1 of the Government’s infrastructure plan proposes to provide $11.9 billion over five years, starting right away. Budget 2016 puts this plan into action with an immediate down payment on this plan, including:

• $3.4 billion over three years to upgrade and improve public transit systems across Canada;
• $5.0 billion over five years for investments in water, wastewater and green infrastructure projects across Canada; and
• $3.4 billion over five years for social infrastructure, including affordable housing, early learning and child care, cultural and recreational infrastructure, and community health care facilities on reserve.

It is not clear how much of the $108.1 billion in the later years would go to public transit, but if the split were on the same basis, then transit would get about $30.9b, Ontario would get $13.6b, and Toronto would get $8b.

Updated: The reason for the mix of three and five year periods for the three funding envelopes is that there is no transit money in years four and five in the “phase 1” spending. The detailed breakdown shows how this works. “Phase 2” is not included in this table, and that is the phase in which major projects (as opposed to catch-up on state of good repair) will occur. Clearly it is intended that the two phases will overlap.

The total of “Toronto” money could be less than the amount originally estimated by me above ($8b) because the total pot from which “transit” spending will be drawn is smaller than $120b as explained in Infrastructure Canada’s email.

If this all goes to fund “below the line” projects, someone has to come up with a matching amount for the local and/or provincial share. Queen’s Park pleads poor and points to the massive investments underway already on GO/RER and other projects, notably the Crosstown LRT line. Toronto says that its borrowing capability is tapped out.

A common phrase used when politicians talk of infrastructure and economic stimulus is “shovel ready projects”. Toronto has some projects that are comparatively close to construction, provided that someone wants to pay for them, but detailed design will soak up a few years before there will be any ribbon-cutting in front of a real construction site. Stimulus, such as it might be, from these projects will occur at best in time for the next election, with the bulk of spending to follow. Indeed, the staging shown in chart 2.1 above pushes the bulk of the spending beyond 2020.

The breakdown of the budget shortfall shows that “state of good repair” funding needs get worse in the latter years of the plan. However, moving some of these items forward just to find something on which the feds might spend money can be counterproductive:

• As mentioned above, if Ottawa pays 50%, then someone else, probably Toronto, must pay the rest, and this would shift Toronto capital spending into a period when the City is hard against its debt target unless new local revenues are found.
• Some projects, such as the purchase of new subway cars for Line 2 (BD), are part of a larger bundle of work that must be choreographed to occur in the correct sequence including a new signal system for the line, additional yard capacity, and the completion of the Scarborough Subway extension. (I discussed this problem in detail in a separate article about the TTC’s fleet plans.)
• Some projects, although included “above or below the line” in TTC plans, can be “nice to haves”, not “must haves”. Advancing spending on them because they easily fit the desire to make work “now” may give them an undeserved priority in the unfunded project list. The largest example of this is a group of projects to increase capacity on Line 1 (YUS), something that should not be launched without the context of a Relief Line’s future effect.

One good aspect of Ottawa’s new plan is that unallocated money at year-end will not be clawed back to help with the federal deficit problem, but will be used to top up funding that now flows through federal gas tax contributions.

The government claims that it will not be prescriptive about the new funding, picking and choosing projects to best suit their own political ends. If they can resist the temptation to build more “Scarborough Subways”, this will count as a small miracle in the evolution of federal transit support. However, new money cannot be dispensed without strings, of which the most important is a need to ensure that Ottawa’s money doesn’t simply offset cuts in City subsidies for transit. We cannot dig ourselves out of the transit infrastructure backlog if we simply redirect money that might buy a new signal system to rebuilding an expressway. This was always a concern at Queen’s Park in the days of open-ended Provincial capital subsidies – that Toronto would simply use the money to save on spending from its own account.

Lurking in the background will be Queen’s Park and their agency, Metrolinx, always hungry for contributions to GO’s service expansion. The new federal money is supposed to be allocated by ridership, and GO’s is only a small slice of the TTC’s numbers. Will they be able to keep their hands out of the cookie jar and allow the money to flow to municipal transit systems?

The challenges for Toronto will be to:

• Identify projects that should be moved “above the line” in the budget, or be brought onto the books from the extended wish list.
• Prioritize new projects in the rapid transit plan, and engage in the hard discussions about exactly what the City’s needs might be. Pet projects need not apply.
• Determine how Toronto will pay its share of projects that, until now, were not part of the City’s capital program.
• Accept that some projects will have operating cost and subsidy implications. There is no point in buying vehicles if the City won’t pay to operate them, and to expect that service can be improved at no net cost is pure fantasy.

Funding announcements are always a time for gatherings before the media, lots of smiles and back-patting among political colleagues, but the hard work comes in deciding how best to spend new transit dollars while they are flowing.

Postscript

Friday, April 8 brought one of the more outlandish examples of re-announcing old funding for transit when MP Adam Vaughan and other worthies gathered at Main Street Station to celebrate the coming of Presto and the new fare gates. Vaughan noted that Ottawa had helped to fund this, but neglected to mention that the original commitment, $46.7 million, was made under the Paul Martin government in 2004. The money no doubt vanished into the black hole of Presto development years ago.

Any other federal funding would be an accounting exercise of allocating a portion of gas tax revenue explicitly to the TTC side of the project. This is an example of the “catch 22” in generic funding: Queen’s Park and Ottawa have some money on the table, but they are minority partners in funding the TTC’s general capital needs.

Updated: Infrastructure Canada has confirmed that there is no additional funding planned for Presto by Ottawa:

The April 8 Presto event was not a new funding announcement. It was an event to mark a significant milestone in the Presto project with our project partners. The milestone was the installation and full functionality of new fare gates at the Main Street Subway Station and the upcoming installation of faregates at the primary entrances of the 42 remaining subway stations that are not yet PRESTO-enabled by the end of 2016.

The Government of Canada is contributing up to $46.5 million for the deployment of the PRESTO fare card on Toronto Transit Commission buses, streetcars and in subway stations. Federal funding for this project comes from the Canada Strategic Infrastructure Fund.  No further federal contributions are planned for the Presto project. [Email of April 14, 2016]